<PAGE>
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SEMIANNUAL REPORT
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[Logo](R)
NEW ENGLAND FUNDS(R)
Where The Best Minds Meet(R)
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New England
Star Worldwide Fund
[graphic omitted]
WHERE
THE BEST
MINDS
MEET(R)
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JUNE 30, 1999
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<PAGE>
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AUGUST 1999
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[Photo of Bruce R. Speca]
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"Most investment professionals I know agree that proper asset allocation is a
bedrock principle of sound investing."
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Dear Shareholder,
Performance results for the New England Family of Funds were driven mainly by
two important changes that took place in our financial markets during the first
half of 1999. First, the long, upward climb of large-capitalization stocks
slowed dramatically as attention turned to stocks with more reasonable
valuations. Then, bond investors grew fearful that our persistently strong
economy would lead the Federal Reserve Board to impose higher interest rates.
Your manager's commentary on the following pages details how these trends
affected your fund's strategy and performance.
As I watch investments come in and out of favor, I'm reminded of the importance
of asset allocation - the practice of dividing your portfolio among different
kinds of stocks and bonds. The idea is to own more or less of each investment
type according to your feelings about risk and your investment time horizon.
Most investment professionals I know agree that proper asset allocation is a
bedrock principle of sound investing. In addition to broadening diversification,
it seeks to avoid exposure to narrow market segments and can help reduce
volatility.
While a diversified portfolio may have given solid returns during the past year,
many investors were disappointed when they compared those returns to the
performance of large-company growth stocks or to the soaring returns of Internet
stocks. Suddenly, investors were asking: Is asset allocation dead?
Certainly not! Like so much in life, market cycles are inevitable. Different
categories of investments will be popular at different times, and a sensible
asset allocation program can help you as market trends change.
I know it can be tempting to jump on a bandwagon and go after "easy money." But
I encourage you, instead, to maintain a rational, long-term perspective and to
consult your financial representative regularly to review and fine-tune
your investments, including a well-diversified asset allocation program.
Thank you for your continued interest. We look forward to helping you achieve
your long-term financial objectives.
Sincerely,
/s/ Bruce R. Speca
Bruce R. Speca
President and CEO
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NEW ENGLAND STAR WORLDWIDE FUND
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INVESTMENT RESULTS THROUGH JUNE 30, 1999
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PUTTING PERFORMANCE IN PERSPECTIVE
The charts comparing your Fund's performance to a benchmark index provide you
with a general sense of how your Fund performed. To put this information in
context, it may be helpful to understand the special differences between the
two. Your Fund's total return for the period shown below appears with and
without sales charges and includes Fund expenses and management fees. A
securities index measures the performance of a theoretical portfolio. Unlike a
fund, the index is unmanaged and does not have expenses that affect the results.
It is not possible to invest directly in an index. In addition, few investors
could purchase all of the securities necessary to match the index and would
incur transaction costs and other expenses even if they could.
The MSCI World Index serves as the primary benchmark for the Fund and as an
additional point of reference, the MSCI EAFE Index serves as the secondary
benchmark. While no one benchmark is a perfect match for a managed fund, the
World Index contains a higher proportion of the markets that could be
represented in the Fund than does the EAFE Index, including U.S. and major
foreign markets. However, the Fund can invest in emerging markets, which are not
represented in the World Index but are represented in the EAFE Index.
GROWTH OF A $10,000 INVESTMENT IN CLASS A SHARES
[A chart in the form of a line graph appears here, illustrating the growth of a
$10,000 investment in Class A Shares compared to Morgan Stanley Capital
International World Index(4) and to Morgan Stanley EAFE Index(5).]
DECEMBER 1995 (INCEPTION) THROUGH JUNE 1999
NAV(1) MSC(2) MSCI World(4) EAFE(5)
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12/95 $10,000 $9,425 $10,000 $10,000
6/96 $11,176 $10,533 $10,733 $10,467
12/96 $11,667 $10,996 $11,400 $10,637
6/97 $13,628 $12,844 $13,180 $11,845
12/97 $13,147 $12,391 $13,249 $10,855
6/98 $14,056 $13,248 $15,481 $12,600
12/98 $13,674 $12,488 $16,534 $13,061
6/99 $15,817 $14,907 $17,971 $13,598
This illustration represents past performance of Class A shares and cannot
predict future results. Investment return and principal value may vary,
resulting in a gain or loss on the sale of shares. Class B and C share
performance will differ from that shown based on differences in fees and sales
charges. All index and Fund performance assumes reinvestment of distributions.
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NOT FDIC INSURED MAY LOSE VALUE NO BANK GUARANTEE
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<PAGE>
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NEW ENGLAND STAR WORLDWIDE FUND
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AVERAGE ANNUAL TOTAL RETURNS - 6/30/99
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SINCE
Class A (Inception 12/29/95) 6 MONTHS 1 YEAR INCEPTION
Net Asset Value(1) 15.7% 12.5% 14.0%
With Maximum Sales Charge(2) 9.0 6.0 12.1
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SINCE
Class B (Inception 12/29/95) 6 MONTHS 1 YEAR INCEPTION
Net Asset Value(1) 15.3% 11.8% 13.2%
With CDSC(3) 10.3 6.8 12.6
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SINCE
Class C (Inception 12/29/95) 6 MONTHS 1 YEAR INCEPTION
Net Asset Value(1) 15.2% 11.8% 13.2%
With CDSC(3) 14.2 10.8 13.2
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SINCE
Comparative Performance 6 MONTHS 1 YEAR INCEPTION
MSCI World Index(4) 8.7% 16.1% 18.2%
MSCI EAFE Index(5) 4.1 7.9 9.2
Lipper Global Average(6) 10.8 10.7 15.8
Morningstar World Stock Average(7) 10.6 9.4 14.2
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NOTES TO CHARTS
These returns represent past performance. Investment return and principal value
will fluctuate so that shares, upon redemption, may be worth more or less than
original cost.
(1) Net Asset Value (NAV) performance assumes reinvestment of all distributions
and does not reflect the payment of a sales charge at time of purchase.
Returns would have been lower had sales charges been reflected.
(2) With Maximum Sales Charge performance assumes reinvestment of all
distributions and reflects the maximum sales charge of 5.75% at the time of
purchase of Class A shares.
(3) With Contingent Deferred Sales Charge (CDSC) performance assumes
reinvestment of all distributions and, for Class B shares, assumes that a
maximum 5.00% sales charge is applied to redemptions. The sales charge will
decrease over time, declining to zero six years after the purchase of
shares. With CDSC performance for Class C shares assumes a maximum 1.00%
sales charge on redemptions within the first year of purchase.
(4) The Morgan Stanley Capital International (MSCI) World Index is a market
cap-weighted index comprised of the performance of 1,481 companies (as of
12/31/98) representing stock markets in 23 developed markets including the
U.S., Canada, Australia, New Zealand and those in Europe and the Far East.
The performance of the index has not been adjusted for ongoing management,
distribution and operating expenses and sales charges applicable to mutual
fund investments. It is not possible to invest directly in an index.
(5) The Morgan Stanley Capital International (MSCI) Europe Australia Far East
Index (EAFE) is an arithmetical average (weighted by market value) of the
performance (in U.S. dollars) of 1,032 companies (as of 12/31/98)
representing stock markets in Europe, Australia, New Zealand and the Far
East. The performance of the index has not been adjusted for ongoing
management, distribution and operating expenses and sales charges applicable
to mutual fund investments. It is not possible to invest directly in an
index.
(6) Lipper Global Average is an average (calculated on the basis of net asset
value) of funds with similar investment objectives as calculated by Lipper
Inc., an independent mutual fund ranking service.
(7) Morningstar World Stock Average is an average (calculated on the basis of
net asset value) of funds with similar investment objectives as calculated
by Morningstar, Inc., an independent mutual fund ranking service.
<PAGE>
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NEW ENGLAND STAR WORLDWIDE FUND
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OVERVIEW: HOW YOUR FUND PERFORMED
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Global investors were rewarded for their patience in weathering the turbulence
that plagued many overseas markets in the past two years. During the first half
of 1999 many global markets stabilized after declining sharply. The renewed
strength in global markets is reflected in New England Star Worldwide Fund's
six-month performance. For the six-month period that ended June 30, 1999, the
Fund's Class A shares, generated a return based on net asset value of 15.7%,
reflecting a $2.52 per share increase to $18.60. The Fund's primary benchmark,
the MSCI World Index, gained 8.7% during the period. The MSCI EAFE Index, which
serves as a secondary benchmark, gained 4.1%.
New England Star Worldwide Fund is composed of five different segments managed
by established investment management companies. This multiple-adviser approach
is the foundation of the Star concept and provides a means to diversify not just
among individual securities but among investment styles and strategies of
several management firms.
A turnaround in emerging markets and Japan
The first six months of 1999 were a time of recovery in many of the world's
financial markets. The most dramatic turnaround occurred in Asia and Latin
America. Armed with International Monetary Fund (IMF) bailouts and a variety of
fundamental economic and financial reform programs instituted over the past
several quarters, the Asian economies stabilized. For example, Korea and
Thailand restructured their banking systems and instituted liberalization
programs that dispersed economic power. Such reforms attracted foreign
investment back into Asia, significantly driving up equity prices.
In Latin America, the latest market jitters occurred in Brazil. In January, the
Brazilian government allowed its currency to float in value on international
exchanges. Many investors feared the worst - a repeat of the currency
devaluations that occurred in Asia. But that didn't happen. While the currency
declined in value and the economy slowed, the reaction was not as bad as some
had predicted. Brazil, as a large exporter, benefited from the currency
devaluation, and exporters gained access to international markets that were
closed to them when the currency was considered overvalued. Investors have
returned to the Brazilian and other Latin American markets where stock prices
have been relatively cheap and returns strong during the six month period.
The Japanese stock market has had one of its best years in recent memory. After
a number of false starts, the Japanese government restructured the country's
banking system and wiped out bad loans. This move altered the psychology of
equity investing in Japan, and foreign capital began to flow in. Japanese
corporations have also instituted reforms. Corporations have begun reorganizing
their businesses to emphasize earnings rather than market share, taking
advantage of large cash flows, quality brand names and good market positioning.
Above all, Japanese companies have started to realize the importance of
shareholder value.
European markets slowed
In Europe, most markets produced lackluster returns, especially when translated
into U.S. dollars. A slowdown in economic growth is one reason for the weak
returns. However, transitional issues associated with introducing the euro, the
region's common currency, also played a part in Europe's difficulties. After it
was introduced in January, the euro lost about 10% of its value in its first six
months, despite expectations that it would appreciate against the U.S. dollar.
A change in market leadership in the U.S.
In the U.S., equity markets continued to make healthy gains, despite concerns
about potentially higher inflation and interest rates during the quarter. A
change in market sentiment during the second quarter produced a change in market
leadership. Some value stocks began to outperform large-cap growth stocks, which
had been market leaders for more than a year. While technology stocks,
particularly Internet-related companies, continued to produce some of the
biggest gains, many economic sectors, including cyclicals, such as energy and
manufacturing stocks, performed well.
Because your Fund invests in a variety of regions, it participated in the
recovery and strength of the major world markets. Many of the Fund's segments
produced double-digit returns, however, those with the largest allocations to
emerging markets made the biggest gains. It is important to note, however, that
past performance is no guarantee of future results. The Oakmark/Harris
international segment, which had significant investments in Asia and Latin
America, led the group. The Janus segment, with less exposure to emerging
markets but significant investment in Japan, also performed well. In August 1998
we changed the Montgomery Asset Management segment from an emerging market
portfolio to a global portfolio, producing favorable results. The Founders
portfolio had modest gains because of its large weighting in Europe. Finally,
the Oakmark/Harris domestic segment, with its emphasis on value stocks, profited
handsomely.
Our outlook
Looking ahead, we are generally positive about the Fund and the long-term
strength of world markets. We think the weakness in European markets is only
temporary and that we will see stronger economic growth in the months ahead.
In the U.S. we are optimistic about general market conditions. While we expect
interest rates to rise slightly, we do not believe they will affect the upside
potential of the market in a major way. In Japan we anticipate additional market
improvement. While stock prices have accelerated rapidly, we believe modest
increases are more realistic over the long term.
YOUR FUND'S 10 LARGEST INVESTMENTS - 6/30/99
% of
Company Net Assets
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1. Cisco Systems (c) 2.0
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2. Mannesmann AG 1.8
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3. NIKE, Inc., Class B 1.6
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4. Black & Decker Corp. 1.5
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5. TYCO International, Ltd. 1.5
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6. Bank One Corp. 1.4
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7. First Data Corp. 1.3
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8. Philip Morris Cos. 1.3
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9. Fortune Brands, Inc. 1.3
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10. Nokia Oyj 1.3
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Portfolio holdings and asset allocations will vary.
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COUNTRY DIVERSIFICATION - 6/30/99
% of
Company Net Assets
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1. United States 43.0
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2. United Kingdom 11.7
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3. Japan 7.4
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4. France 5.2
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5. Netherlands 4.7
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6. Germany 4.3
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7. Finland 3.8
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8. Spain 2.3
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9. Sweden 2.2
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10. Italy 2.0
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Portfolio holdings and asset allocations will vary.
---------------------------------------------------
The portfolio managers' commentary reflects the conditions and actions taken
during the reporting period, which are subject to change. A shift in opinion may
result in strategic and other portfolio changes. The Fund invests in foreign and
emerging market securities. Foreign and emerging market securities may be
affected by currency fluctuations, high volatility and limited liquidity.
Political, economic and information risks are also associated with foreign
securities. Investments in emerging markets may be subject to these risks to a
greater extent than those in more developed markets.The Fund may invest in
higher yielding securities. Investments in lower-rated, higher yielding bonds
may involve greater risk. The Fund may invest in small-cap companies, which
involves greater risk than is customarily associated with more established
companies. The Fund may invest in REITS which are subject to changes in
underlying real estate values, rising interest rates, limited diversification of
holdings, higher costs and prepayment risk associated with related mortgages.
These investments may also be affected by the conversion of the currency of
several European countries to the euro.This Fund may invest in derivative
securities for hedging purposes. These risks may increase share price
volatility. See the Fund's prospectus for details.
<PAGE>
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PORTFOLIO COMPOSITION
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Investments as of June 30, 1999
(unaudited)
COMMON STOCK - 93.3% OF TOTAL NET ASSETS
SHARES DESCRIPTION VALUE (A)
ARGENTINA - 0.9%
148,000 Quilmes Industrial S.A., Preferred (ADR) (c) .... $ 1,831,500
6,055 Telecom Argentina S.A. (ADR) .................... 161,971
7,220 Telefonica de Argentina S.A. (ADR) .............. 226,528
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2,219,999
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AUSTRALIA - 0.3%
266,200 Cable & Wireless Optus, Ltd. .................... 605,342
170,000 Reinsurance Australia Corporation, Ltd. ......... 141,597
------------
746,939
------------
AUSTRIA - 0.3%
6,500 Austria Tabak AG ................................ 378,580
7,775 Bank Austria AG ................................. 408,758
------------
787,338
------------
BELGIUM - 0.1%
7,500 Lernout & Hauspie Speech Products (c) ........... 265,781
------------
BRAZIL - 1.7%
16,900,000 Embratel Participacoes S.A.(c) .................. 125,998
46,900,000 Tele Centro Sul Participacoes S.A.(c) ........... 247,679
51,900,000 Tele Sudeste Celular Participacoes S.A.(c) ...... 143,637
10,710 Telecomunicacoes Brasileiras (ADR) .............. 965,908
159,500,000 Telemig Celular Participacoes S.A.(c) ........... 179,274
91,900,000 Telesp Celular Participacoes S.A. (c) ........... 493,109
30,900,000 Telesp Participacoes S.A. (c) ................... 397,747
55,900 Uniao de Bancos Brasileiros S.A. (GDR)(c) ....... 1,345,094
12,400,000 Unibanco - Uniao de Bancos Brasileiros S.A. (c) . 560,294
------------
4,458,740
------------
CANADA - 1.2%
30,375 AT&T Canada, Inc ................................ 1,945,899
6,384 Rogers Communications, Inc, Class B ............. 103,341
7,170 Seagram Company, Ltd. ........................... 361,189
2,206 Shaw Communications, Class B .................... 87,341
15,000 Telesystem International Wireless, Inc .......... 272,496
19,500 Videotron Group, Ltd. ........................... 311,205
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3,081,471
------------
FINLAND - 3.8%
3,000 Kone Corp., Class B ............................. 374,199
160,000 Merita, Ltd. .................................... 908,798
19,920 Nokia Corp. (ADR) ............................... 1,823,925
37,152 Nokia Oyj ....................................... 3,255,343
80,000 Outokumpu Oyj ................................... 898,901
11,240 Tieto Corp. ..................................... 468,105
185,703 Valmet-Rauma Oyj ................................ 2,105,757
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9,835,028
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FRANCE - 5.2%
17,300 Alstom (c) ...................................... 543,928
3,464 Atos S.A ........................................ 353,516
4,340 Banque Nationale de Paris ....................... 361,490
9,000 Business Objects S.A. (ADR) (c) ................. 328,500
1,700 Canal Plus ...................................... 476,840
12,799 Capital Gemini S.A .............................. 2,010,743
39,545 Chargeurs S.A ................................... 2,201,308
4,480 Coflexip S.A .................................... 384,466
2,543 Elf Aquitaine S.A ............................... 373,033
27,600 Groupe Air France ............................... 492,210
4,325 Groupe Danone ................................... 1,114,607
12,200 ISIS (c) ........................................ 861,482
2,692 Lyonnaise des Eaux S.A .......................... 485,356
8,612 Sanofi-Synthelabo S.A ........................... 365,317
5,230 Total Fina S.A .................................. 674,457
29,735 Vivendi ......................................... 2,407,741
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13,434,994
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GERMANY - 4.3%
2,080 Buderus AG (c) .................................. 834,082
2,082 DaimlerChrysler AG .............................. 180,283
4,116 DaimlerChrysler AG (c) .......................... 365,809
10,378 Depfa Bank ...................................... 941,438
35,625 Deutsche Lufthansa AG ........................... 645,609
12,500 Fresenius Medical Care AG (ADR) ................. 250,781
30,812 Mannesmann AG ................................... 4,596,042
2,235 MLPAG, Preferred ................................ 1,064,425
180 Porsche AG, Preferred ........................... 423,061
13,800 Prosieben Media AG, Preferred (c) ............... 625,932
10,250 Schwarz Pharma AG ............................... 473,367
9,200 Veba AG ......................................... 540,578
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10,941,407
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HONG KONG - 1.5%
296,000 China Telecom, Ltd. (ADR)(c) .................... 822,159
595,000 First Pacific Company, Ltd. ..................... 506,148
2,724,000 Giordano International, Ltd. .................... 1,931,018
5,600 HSBC Holdings plc ............................... 204,264
240,000 Varitronix International, Ltd. .................. 499,575
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3,963,164
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IRELAND - 0.0%
1 Bank of Ireland ................................. 11
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ISRAEL - 0.1%
1 Makhteshim-Agam Industries, Ltd. (c) ............ 1
------------
3,000 Teva Pharmaceutical Industries, Ltd. (ADR) ...... 147,000
------------
147,001
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ITALY - 2.0%
21,000 Arnoldo Mondadori Editore S.p.A ................. 363,684
441,525 Banca di Roma ................................... 634,929
38,800 Banca Lombarda S.p.A ............................ 477,964
148,400 Fila Holdings S.p.A. (ADR) ...................... 1,752,975
8,900 Industrie Natuzzi S.p.A. (ADR) .................. 172,994
114,500 Monte dei Paschi di Siena S.p.A ................. 507,539
8,361 Tecnost S.p.A ................................... 20,599
61,130 Telecom Italia Mobile S.p.A ..................... 364,862
69,000 Telecom Italia S.p.A ............................ 716,977
32,057 Unicredito Italiano S.p.A. (c) .................. 140,776
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5,153,299
------------
JAPAN - 7.4%
11,200 Aiwa Co., Ltd. .................................. 370,340
64,000 Canon, Inc. ..................................... 1,841,118
252,000 Citizen Watch Co. ............................... 2,187,319
3,000 Doutor Coffee ................................... 159,213
8,000 Fujitsu ......................................... 161,032
63,000 Hitachi, Ltd. ................................... 591,097
8,000 Honda Motor Co. ................................. 339,258
5,000 Ito-Yokado Company, Ltd. ........................ 334,794
36 Japan Telecom Company, Ltd. ..................... 511,862
53,000 Kao Corp. ....................................... 1,489,625
28,000 Kirin Brewery Co. ............................... 335,620
38,200 Konami Company, Ltd. ............................ 1,578,904
42,000 Nagase & Co. .................................... 199,636
123,000 Nissan Motor Co. ................................ 587,699
52 NTT Data Corp ................................... 413,524
45 NTT Mobile Communications Network, Inc. ......... 610,068
180 NTT Mobile Communications Network, Inc., New 2,410,515
900 Softbank Corp. .................................. 182,351
15,000 Sony Corp. ...................................... 1,618,170
20,000 Takeda Chemical Industries ...................... 927,503
15,200 Takefuji Corp. .................................. 1,571,894
6,000 TDK Corp. ....................................... 549,062
------------
18,970,604
------------
MEXICO - 0.6%
6,705 Grupo Televisa S.A. (ADR) ....................... 300,468
14,620 Telefonos de Mexico S.A. (ADR) 144A ............. 1,181,479
------------
1,481,947
------------
NETHERLANDS - 4.7%
7,156 Aegon NV ........................................ 518,955
2,425 ASM Lithography Holding (c) ..................... 143,984
2,452 ASM Lithography Holding NV ...................... 141,801
13,925 Benckiser NV, Class B (c) ....................... 742,850
150 CSM NV .......................................... 7,615
3,371 Equant NV (c) ................................... 310,665
54,650 European Vinyls Corporation International NV .... 461,955
21,584 Getronics NV .................................... 829,920
11,185 Heineken NV ..................................... 572,468
40,600 Hunter Douglas .................................. 1,393,689
18,526 ING Groep NV .................................... 1,002,620
8,733 Koninklijke (Royal) Philips Electronics NV ...... 861,034
9,311 Koninklijke (Royal) Philips Electronics NV (ADR) 939,247
11,004 Koninklijke KPN NV .............................. 516,128
13,900 Libertel NV ..................................... 272,248
16,088 Ordina Beheer NV (c) ............................ 464,361
15,100 United Pan-Europe Communications NV ............. 818,763
23,000 VNU NV .......................................... 918,745
30,252 Wolters Kluwer NV ............................... 1,203,752
------------
12,120,800
------------
NEW ZEALAND - 0.7%
558,532 Fernz Corporation, Ltd. ......................... 1,614,603
100,000 Fletcher Challenge Building ..................... 145,599
------------
1,760,202
------------
NORWAY - 0.2%
36,900 Schibsted ASA ................................... 414,396
------------
PANAMA - 0.7%
68,700 Banco Latinoamericano de Exportaciones S.A.,
Class E ....................................... 1,837,725
------------
PORTUGAL - 0.4%
17,500 Brisa-Auto Estradas de Portugal, S.A ............ 721,595
3,300 Telecel-Communicaca- oes Pessoais S.A ........... 425,226
------------
1,146,821
------------
SINGAPORE - 0.3%
30,000 Singapore Press Holdings, Ltd. .................. 511,163
31,000 United Overseas Bank - Foreign Shares ........... 216,745
------------
727,908
------------
SOUTH AFRICA - 0.0%
1 Barlow, Ltd. .................................... 6
23 BOE, Ltd. ....................................... 23
369 JCI Gold ........................................ 336
39 Randfontein Estates Gold Mining Co. ............. 67
------------
432
------------
SOUTH KOREA - 1.3%
10,500 Dongah Tire Industry Co. (c) .................... 488,942
17,540 Keumkang, Ltd. .................................. 1,106,194
5,650 Korea Telecom (ADR) ............................. 226,000
5,000 Lotte Chilsung Beverage Co. ..................... 526,998
689 SK Telecom Company, Ltd. ........................... 922,635
158 SK Telecom Company, Ltd. (Rights) .................. 80,945
------------
3,351,714
------------
SPAIN - 2.3%
32,360 Argentaria S.A.Corp. Bancaria de Espana ......... 735,551
24,079 Banco Bilbao Vizcaya S.A ........................ 347,754
102,014 Banco Santander Central Hispano S.A ............. 1,062,128
11,100 Baron de Ley, S.A. (c) .......................... 383,322
18,800 Superdiplo S.A. (c) ............................. 416,669
19,350 Telefonica Publicidad e Informacion S.A ......... 385,973
40,914 Telefonica S.A .................................. 1,975,112
1,586 Telefonica S.A. (ADR) ........................... 233,355
73,449 Telepizza ....................................... 380,089
------------
5,919,953
------------
SWEDEN - 2.2%
95,392 Assa Abloy AB (Rights) .......................... 1,033,816
95,392 Assa Abloy AB, Series B ......................... 1,033,816
14,700 Enator AB (c) ................................... 441,571
12,524 Ericsson Telefoniaktiebolag Series B ............ 402,025
107,300 Getinge Industrier AB ........................... 1,586,306
69,268 Securitas AB .................................... 1,036,287
------------
5,533,821
------------
SWITZERLAND - 1.3%
135 Julius Baer Holdings ............................ 384,573
47 Roche Holdings AG (c) ........................... 482,966
5,163 Swisscom AG (c) ................................. 1,942,225
180 The Swatch Group AG ............................. 121,073
666 Zurich Allied AG ................................ 378,589
------------
3,309,426
------------
TAIWAN - 0.2%
1 Synnex Technology International Corp. 144A (GDR) 27
14,000 Taiwan Semiconductor Manufacturing Company,
Ltd.(c) (ADR) ................................. 476,000
------------
476,027
------------
UNITED KINGDOM - 11.7%
25,000 Alliance and Leicester plc ...................... 337,318
34,000 Allied Irish Banks plc .......................... 446,962
23,068 Amvescap plc .................................... 205,621
14,700 Barclays plc .................................... 427,966
206,000 Berisford plc ................................... 782,545
36,200 British Airways plc ............................. 250,209
21,525 British Telecom ................................. 361,002
61,220 Capita Group plc ................................ 633,510
173,717 Charter plc ..................................... 1,010,401
28,594 COLT Telecom Group .............................. 601,251
5,600 COLT Telecom Group plc (ADR) .................... 483,700
143,772 Compass Group plc ............................... 1,425,444
808,000 Cordiant Communications Group plc ............... 2,235,186
45,400 Diageo plc ...................................... 476,959
30,800 Dixons Group .................................... 576,756
35,051 Energis plc (c) ................................. 835,920
13,090 Glaxo Wellcome plc .............................. 363,556
53,649 Hays plc ........................................ 564,466
11,600 HSBC Holdings plc ............................... 410,853
197,000 IMI plc ......................................... 798,537
229,275 Ladbroke Group plc .............................. 909,811
17,500 Lloyds TSB Group ................................ 238,053
57,178 Logica plc ...................................... 599,343
115,000 Morgan Crucible Co. ............................. 490,332
24,700 National Express Group .......................... 394,201
24,100 Next plc ........................................ 292,885
76,898 Orange plc (c) .................................. 1,125,439
53,500 Pearson plc ..................................... 1,097,969
21,975 Prudential Corp. plc ............................ 323,866
21,120 Railtrack Group ................................. 431,777
31,263 Rentokil Initial plc ............................ 121,717
175,000 Rolls-Royce plc ................................. 741,330
65,000 Royal & Sun Alliance Insurance Group plc ........ 581,952
258,000 Saatchi & Saatchi plc (c) ....................... 868,246
15,890 Sema Group plc .................................. 153,285
13,200 Shell Transport & Trading Co. (ADR) ............. 612,150
4,461 SmithKline Beecham plc .......................... 57,976
436,000 Somerfield plc .................................. 2,044,554
13,500 TeleWest Communications plc (ADR) ............... 617,625
550,967 Tomkins plc ..................................... 2,394,784
14,216 Vodafone Group plc .............................. 279,652
9,193 Vodafone Group plc (ADR) ........................ 1,810,923
66,051 WPP Group plc ................................... 560,127
------------
29,976,159
------------
UNITED STATES - 37.9%
100,366 ACNielson Corp. ................................. 3,036,071
2,215 Amazon.com, Inc. (c) ............................ 277,152
2,270 America Online .................................. 250,835
4,655 American Express Co. ............................ 605,732
5,800 Amgen, Inc. (c) ................................. 353,075
16,849 AT&T Corp. ...................................... 940,385
14,110 AT&T Corp. - Liberty Media Group ................ 518,543
4,000 Baker Hughes, Inc. .............................. 134,000
59,052 Bank One Corp. .................................. 3,517,285
4,600 Biogen, Inc. (c) ................................ 295,838
61,300 Black & Decker Corp. ............................ 3,869,562
6,300 BMC Software, Inc. (c) .......................... 340,200
62,000 Brunswick Corp. ................................. 1,728,250
10,200 Carrier Access Corp. ............................ 446,888
14,400 CheckFree Holdings Corp. (c) .................... 396,900
77,380 Cisco Systems (c) ............................... 4,986,174
15,000 Citigroup, Inc. ................................. 712,500
28,353 Clear Channel Communications (c) ................ 1,954,585
65,000 Columbia/HCA Healthcare ......................... 1,482,812
42,970 Comcast ......................................... 1,651,659
59,100 Dun & Bradstreet Corp. .......................... 2,094,356
35,000 Eaton Corp. ..................................... 3,220,000
2,120 eBay, Inc. ...................................... 320,120
3,130 EMC Corp. (c) ................................... 172,150
13,200 Emerson Electric Co. ............................ 829,950
3,985 Enron Corp. ..................................... 325,774
9,765 Equant NV (c) ................................... 919,131
22,670 Estee Lauder Companies, Inc. .................... 1,136,334
25,570 FDX Corp. (c) ................................... 1,387,172
4,345 Federal National Mortgage Association ........... 297,089
70,000 First Data Corp. ................................ 3,425,625
80,200 Fortune Brands, Inc. ............................ 3,318,275
4,000 General Motors Corp. ............................ 225,000
16,175 Global TeleSystems Group, Inc. (c) .............. 1,310,175
28,750 Guitar Center, Inc. (c) ......................... 300,078
58,000 H & R Block, Inc. ............................... 2,900,000
18,000 HEALTHSOUTH Corp. (c) ........................... 268,875
16,958 Intimate Brands, Inc. ........................... 803,362
3,425 Intuit, Inc. (c) ................................ 308,678
20,800 Jones Apparel Group (c) ......................... 713,700
50,400 Knight-Ridder, Inc. ............................. 2,768,850
7,730 Kroger Co. (c) .................................. 215,957
1 LifePoint Hospitals, Inc. ....................... 1
60,000 Lockheed Martin Corp. ........................... 2,235,000
4,455 Lucent Technologies, Inc. ....................... 300,434
1,590,000 Mandarin Oriental International, Ltd. ........... 1,399,200
70,000 Mattel, Inc. .................................... 1,850,625
36,525 MCI Worldcom, Inc. (c) .......................... 3,143,433
9,285 MediaOne Group, Inc. (c) ........................ 690,572
4,945 Medtronic, Inc. ................................. 385,092
25,295 Microsoft Corp. (c) ............................. 2,281,293
49,600 Nabisco Holdings Corp. .......................... 2,145,200
2,000 New Era of Networks, Inc. ....................... 87,875
65,000 NIKE, Inc., Class B ............................. 4,115,312
1,815 NTL, Inc. ....................................... 156,430
104,625 Old Republic International Co. .................. 1,811,320
11,575 PepsiCo, Inc. ................................... 447,808
8,265 Pfizer, Inc. .................................... 907,084
12,910 Pharmacia & Upjohn, Inc. ........................ 733,449
83,000 Philip Morris Cos ............................... 3,335,562
44,000 Polaroid Corp. .................................. 1,215,500
4,400 Project Software & Development, Inc. ............ 137,500
11,820 R. H. Donnelley Corp. ........................... 231,229
9,600 Seagate Technology (c) .......................... 246,000
505 Sepracor, Inc. (c) .............................. 41,031
19,595 Sprint PCS ...................................... 1,119,364
8,180 Sun Microsystems, Inc. (c) ...................... 563,398
72,000 The Boeing Co. .................................. 3,181,500
28,205 Time Warner, Inc. ............................... 2,073,067
1 Triad Hospitals, Inc. ........................... 1
39,873 TYCO International, Ltd. ........................ 3,777,967
2,660 U.S. West, Inc. ................................. 156,275
12,870 Unitedglobalcom, Preferred, 144A ................ 643,500
9,845 Warner-Lambert Co. .............................. 682,997
65,000 Washington Mutual, Inc. ......................... 2,299,375
------------
97,153,491
------------
Total Common Stock
(Identified Cost $187,977,745) ................ 239,216,598
------------
BONDS AND NOTES - 0.1%
PRINCIPAL
AMOUNT
ITALY - 0.0%
$ 92,800 Tecnost International, 4.487%, 6/23/04 .......... 97,337
------------
UNITED STATES - 0.1%
250,000 United States Treasury Bills, 0.010%, 7/22/99 ... 249,405
------------
Total Bonds and Notes (Identified Cost $323,563) 346,742
------------
<PAGE>
PRINCIPAL
AMOUNT DESCRIPTION VALUE (A)
$6,600,000 Household Finance Corp., 5.450%, 7/01/99 ........ $ 6,600,000
6,112,000 Repurchase Agreement with State Street Bank and
Trust Co. dated 6/30/99 at 4.000% to be
repurchased at $6,112,679 on 7/01/99,
collateralized by $5,545,000 U.S. Treasury Bond
7.500% due 11/15/16 with a value of $6,238,125 6,112,000
6,921,000 Repurchase Agreement with State Street Bank and
Trust Co. dated, 6/30/99 at 4.750% to be
repurchased at $6,921,914 on 7/01/99,
collateralized by $6,280,000 U.S. Treasury Bond
7.500% due 11/15/16 with a value of $7,065,000 6,921,000
------------
Total Short Term Investments
(Identified Cost $19,633,000) ................. 19,633,000
------------
Total Investments - 101.1%
(Identified Cost $207,934,308) (b) ............ 259,196,340
Other assets less liabilities ................... (2,889,153)
------------
Total Net Assets - 100% ......................... $256,307,187
============
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION - continued
- --------------------------------------------------------------------------------
Investments as of June 30, 1999
(unaudited)
<TABLE>
FORWARD CURRENCY CONTRACTS OUTSTANDING
at June 30, 1999
<CAPTION>
LOCAL AGGREGATE UNREALIZED
DELIVERY CURRENCY FACE TOTAL APPRECIATION/
DATE AMOUNT VALUE VALUE DEPRECIATION
-------- -------- --------- -------- -------------
<S> <C> <C> <C> <C> <C>
British Pounds (sold) 10/8/99 80,000 $ 130,740 $ 126,215 $ 4,525
British Pounds (sold) 10/14/99 300,000 485,820 473,347 12,473
British Pounds (sold) 5/4/99 1,825,000 2,949,200 2,881,985 67,215
Canadian Dollar (sold) 10/8/99 50,000 34,802 34,004 798
Canadian Dollar (sold) 5/18/99 30,000 20,640 20,412 228
Euro (sold) 7/15/99 400,000 468,440 412,788 55,652
Euro (sold) 7/28/99 400,000 470,320 413,177 57,143
Euro (sold) 8/12/99 1,100,000 1,299,100 1,137,505 161,595
Euro (sold) 8/27/99 1,400,000 1,641,220 1,449,364 191,856
Hong Kong Dollar (sold) 5/7/2001 6,400,000 803,386 804,983 (1,597)
Japanese Yen (sold) 7/6/99 187,714,000 1,700,000 1,553,063 146,937
Japanese Yen (sold) 7/13/99 173,010,000 1,628,023 1,432,833 195,190
Japanese Yen (sold) 9/15/99 135,000,000 1,166,811 1,128,805 38,006
Japanese Yen (sold) 10/8/99 85,000 760,842 713,197 47,645
Japanese Yen (sold) 10/14/99 90,000,000 772,068 755,852 16,216
Japanese Yen (sold) 10/21/99 20,000,000 171,882 168,150 3,732
Japanese Yen (sold) 11/18/99 17,000,000 148,472 143,552 4,920
Japanese Yen (sold) 12/3/99 95,000,000 791,667 804,081 (12,414)
Japanese Yen (sold) 12/17/99 109,000,000 921,226 924,602 (3,376)
Swiss Franc (sold) 10/8/99 150,000 102,775 97,581 5,194
Swiss Franc (sold) 10/21/99 220,000 151,203 143,330 7,873
Swiss Franc (sold) 11/18/99 140,000 97,765 91,500 6,265
-----------
$16,716,402 $15,710,326 $ 1,006,076
===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO COMPOSITION - continued
- --------------------------------------------------------------------------------
Investments as of June 30, 1999
(unaudited)
TEN LARGEST INDUSTRY HOLDINGS AT JUNE 30, 1999
Telecommunication 12.3% Broadcasting 3.5%
Banks & Thrifts 7.6% Apparel & Textiles 3.4%
Computer Software & Services 5.5% Publishing 3.2%
Diversified Conglomerates 5.3% Consumer Goods & Services 3.1%
Food & Beverages 5.1% Machinery 3.0%
(a) See Note 1a of Notes to Financial Statements.
(b) Federal Tax Information: at June 30, 1999 the net Unrealized
appreciation on investments based on cost of $207,934,308 for federal
income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over
tax cost .............................................. $ 61,749,974
Aggregate gross unrealized depreciation for all
investments in which there is an excess of tax cost
over value ............................................ (10,487,942)
------------
Net unrealized appreciation ............................. $ 51,262,032
============
(c) Non-income producing security.
ADR/GDR An American Depository Receipt (ADR) or Global Depository Receipt (GDR)
is a certificate issued by a Custodian Bank representing the right to
receive securities of the foreign issuer described. The values of ADRs
and GDRs are significantly influenced by trading on exchanges not
located in the United States or Canada.
144A Securities exempt from registration under Rule 144A of the Securities
Act of 1933. These securities may be resold in transactions exempt from
registration, normally to qualified institutional buyers. At period
end, the value of these securities amounted to $1,825,006 or 0.7% of
net assets.
See accompanying notes to financial statements.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS & LIABILITIES
- --------------------------------------------------------------------------------
June 30, 1999
(unaudited)
ASSETS
Investments at value (Identified cost $207,934,304) $259,196,340
Foreign currency at value (Identified cost $710,317) 712,317
Collateral for securities loaned, at value ......... 4,791,958
Receivable for:
Fund shares sold ................................. 731,905
Securities sold .................................. 3,066,695
Open forward currency contracts - net ............ 1,006,076
Dividends and interest ........................... 397,053
Tax Reclaims ..................................... 107,521
Unamortized organization expense ................... 20,024
------------
270,029,889
------------
LIABILITIES
Payable for:
Collateral for securities loaned, at value ....... $4,791,958
Securities purchased ............................. 7,977,994
Fund shares redeemed ............................. 379,561
Due to custodial bank ............................ 87,260
Foreign withholding taxes ........................ 22,425
Accrued expenses:
Management fees .................................. 212,721
Deferred trustees' fees .......................... 10,426
Accounting and administrative .................... 12,250
Other expenses ................................... 228,107
----------
13,722,702
------------
NET ASSETS ............................................ $256,307,187
============
Net Assets consist of:
Capital paid in .................................... $192,144,595
Accumulated net investment losses .................. (939,255)
Accumulated net realized gains (losses) ............ 12,851,257
Unrealized appreciation (depreciation) on
investments, forward currency contracts and
foreign currency transactions - net .............. 52,250,590
------------
NET ASSETS ............................................ $256,307,187
============
Computation of net asset value and offering price:
Net asset value and redemption price of Class A shares
($113,175,774 / 6,084,882 shares of beneficial interest) $ 18.60
Offering price per share (100 / 94.25 of $18.60) $ 19.73*
Net asset value and offering price of Class B shares
($119,337,880 / 6,583,295 shares of beneficial interest) $ 18.13**
Net asset value and offering price of Class C shares
($23,793,533 / 1,311,705 shares of beneficial interest) $ 18.14**
* Based upon single purchases of less than $50,000.
Reduced sales charges apply for purchases in excess of this amount.
** Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
Six Months Ended June 30, 1999
(unaudited)
INVESTMENT INCOME
Dividends (net of foreign taxes of $173,654) ...... $ 1,950,128
Interest .......................................... 209,947
Securities lending income ......................... 26,292
------------
2,186,367
Expenses
Management fees ................................. $1,269,674
Service fees - Class A .......................... 130,772
Service and distribution fees - Class B ......... 573,426
Service and distribution fees - Class C ......... 112,697
Trustees' fees and expenses ..................... 9,523
Accounting and administrative ................... 37,750
Custodian and securities lending ................ 320,962
Transfer agent .................................. 482,746
Audit and tax services .......................... 23,000
Legal ........................................... 10,430
Printing ........................................ 27,295
Amortization of organization expense ............ 20,620
Registration .................................... 6,460
Insurance ....................................... 2,200
Miscellaneous ................................... 6,842
----------
Total expenses .................................... 3,034,397
------------
Net investment income (loss) ...................... (848,030)
------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS,
FORWARD CURRENCY AND FOREIGN CURRENCY TRANSACTIONS
Realized gain (loss) on:
Investments - net ............................... 14,420,576
Forward currency - net .......................... 109,815
Foreign currency transactions - net ............. 571,026
----------
Net realized gain (loss) on investments,
forward currency and foreign currency
transactions ................................... 15,101,417
----------
Unrealized appreciation (depreciation) on:
Investments - net ............................... 20,089,623
Foreign currency transactions - net ............. 1,272,216
----------
Net unrealized appreciation (depreciation) on
investments, forward currency and foreign
currency transactions ......................... 21,361,839
----------
Net gain (loss) on investment transactions ........ $ 36,463,256
------------
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .. $ 35,615,226
============
See accompanying notes to financial statements.
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------
(unaudited)
<CAPTION>
SIX MONTHS
YEAR ENDED ENDED
DECEMBER 31, JUNE 30,
1998 1999
------------ ------------
FROM OPERATIONS
<S> <C> <C>
Net investment income (loss) ................................. $ (1,030,505) $ (848,030)
Net realized gain (loss) on investments, forward currency
and foreign currency transactions .......................... (3,136,961) 15,101,417
Net unrealized appreciation (depreciation) on investments,
forward currency and foreign currency transactions ......... 13,069,028 21,361,839
------------ ------------
Increase (decrease) in net assets from operations ............ 8,901,562 35,615,226
------------ ------------
INCREASE (DECREASE) IN NET ASSETS
DERIVED FROM CAPITAL SHARE TRANSACTIONS ...................... (30,804,047) (25,390,959)
------------ ------------
Total increase (decrease) in net assets ......................... (21,902,485) 10,224,267
NET ASSETS
Beginning of the period ...................................... 267,985,405 246,082,920
------------ ------------
End of the period ............................................ $246,082,920 $256,307,187
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME (LOSS)
End of the period ............................................ $ (91,225) $ (939,255)
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
(unaudited)
<CAPTION>
CLASS A
-----------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------- JUNE 30,
1996 1997 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period (a) ........... $ 12.50 $ 14.40 $ 15.46 $ 16.08
-------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income (Loss) (b) ................... (0.03) (0.02) 0.01 (0.03)
Net Realized and Unrealized Gain (Loss) on Investments 2.11 1.88 0.61 2.55
-------- -------- -------- --------
Total From Investment Operations ................... 2.08 1.86 0.62 2.52
-------- -------- -------- --------
Less Distributions
Distributions From Net Realized Capital Gains ...... (0.18) (0.76) 0.00 0.00
Distributions From Paid-in Capital ................. 0.00 (0.04) 0.00 0.00
-------- -------- -------- --------
Total Distributions ................................ (0.18) (0.80) 0.00 0.00
-------- -------- -------- --------
Net Asset Value, End of Period ..................... $ 14.40 $ 15.46 $ 16.08 $ 18.60
======== ======== ======== ========
Total Return (%) (c) ............................... 16.7 12.7 4.0 15.7
Ratio of Operating Expenses to Average Net Assets (%) 2.58 2.07 2.09 2.08(d)
Ratio of Net Investment Income (Loss) to Average Net
Assets (%) ....................................... (0.21) (0.12) 0.03 (0.26)(d)
Portfolio Turnover Rate (%) ........................ 57 80 84 109
Net Assets, End of Period (000) .................... $ 68,509 $118,381 $106,763 $113,176
(a) Fund commenced operations December 29, 1995.
(b) Per Share net investment income (loss) has been calculated using the average shares outstanding during the
period.
(c) A sales charge in the case of Class A Shares is not reflected in total return calculations.
(d) Computed on an annualized basis.
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
(unaudited)
<CAPTION>
CLASS B
-----------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------- JUNE 30,
1996 1997 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period (a) ........... $ 12.50 $ 14.30 $ 15.23 $ 15.73
-------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income (Loss) (b) ................... (0.12) (0.14) (0.11) (0.10)
Net Realized and Unrealized Gain (Loss) on Investments 2.10 1.87 0.61 2.50
-------- -------- -------- --------
Total From Investment Operations ................... 1.98 1.73 0.50 2.40
-------- -------- -------- --------
Less Distributions
Distributions From Net Realized Capital Gains ...... (0.18) (0.76) 0.00 0.00
Distributions From Paid-in Capital ................. 0.00 (0.04) 0.00 0.00
-------- -------- -------- --------
Total Distributions ................................ (0.18) (0.80) 0.00 0.00
-------- -------- -------- --------
Net Asset Value, End of Period ..................... $ 14.30 $ 15.23 $ 15.73 $ 18.13
======== ======== ======== ========
Total Return (%) (c) ............................... 15.9 11.9 3.3 15.3
Ratio of Operating Expenses to Average Net Assets (%) 3.33 2.82 2.84 2.83(d)
Ratio of Net Investment Income (Loss) to Average Net
Assets (%) ....................................... (0.96) (0.87) (0.72) (1.01)(d)
Portfolio Turnover Rate (%) ........................ 57 80 84 109
Net Assets, End of Period (000) .................... $ 65,367 $123,467 $116,305 $119,338
(a) Fund commenced operations on December 29, 1995.
(b) Per Share net investment income (loss) has been calculated using the average shares outstanding during the
period.
(c) A contingent deferred sales charge in the case of Class B Shares is not reflected in total return
calculations.
(d) Computed on an annualized basis.
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------------------------------------
(unaudited)
<CAPTION>
CLASS C
-----------------------------------------------------
SIX MONTHS
YEAR ENDED DECEMBER 31, ENDED
------------------------------------- JUNE 30,
1996 1997 1998 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period (a) ........... $ 12.50 $ 14.31 $ 15.24 $ 15.75
-------- -------- -------- --------
Income (Loss) From Investment Operations
Net Investment Income (Loss) (b) ................... (0.12) (0.13) (0.11) (0.10)
Net Realized and Unrealized Gain (Loss) on Investments 2.11 1.86 0.62 2.49
-------- -------- -------- --------
Total From Investment Operations ................... 1.99 1.73 0.51 2.39
-------- -------- -------- --------
Less Distributions
Distributions From Net Realized Capital Gains ...... (0.18) (0.76) 0.00 0.00
Distributions From Paid-in Capital ................. 0.00 (0.04) 0.00 0.00
-------- -------- -------- --------
Total Distributions ................................ (0.18) (0.80) 0.00 0.00
-------- -------- -------- --------
Net Asset Value, End of Period ..................... $ 14.31 $ 15.24 $ 15.75 $ 18.14
======== ======== ======== ========
Total Return (%) (c) ............................... 15.9 11.8 3.3 15.2
Ratio of Operating Expenses to Average Net Assets (%) 3.33 2.82 2.84 2.83(d)
Ratio of Net Investment Income (Loss) to Average Net
Assets (%) ....................................... (0.96) (0.87) (0.72) (1.01)(d)
Portfolio Turnover Rate (%) ........................ 57 80 84 109 d)
Net Assets, End of Period (000) .................... $ 17,980 $ 26,137 $ 23,016 $ 23,794
(a) Fund commenced operations on December 29, 1995.
(b) Per Share net investment income (loss) has been calculated using the average shares outstanding during the
period.
(c) A contingent deferred sales charge in the case of Class C Shares is not reflected in total return
calculations.
(d) Computed on an annualized basis.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
For the Period Ended June 30, 1999
(unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES. The Fund is a series of New England Funds
Trust I, a Massachusetts business trust (the "Trust"), and is registered under
the Investment Company Act of 1940, as amended, (the "1940 Act") as an open-end
management investment company. The Fund seeks long-term growth of capital. The
Declaration of Trust permits the Trustees to issue an unlimited number of shares
of the Trust in multiple series (each such series of shares a "Fund").
The Fund offers Class A, Class B, and Class C shares. Class A shares are sold
with a maximum front end sales charge of 5.75%. Class B shares do not pay a
front end sales charge, but pay a higher ongoing distribution fee than Class A
shares for eight years (at which point they automatically convert to Class A
shares), and are subject to a contingent deferred sales charge if those shares
are redeemed within six years of purchase (or five years if purchased before May
1, 1997). Class C shares do not pay front end sales charges and do not convert
to any other class of shares, but they do pay a higher ongoing distribution fee
than Class A shares and are subject to a contingent deferred sales charge if
those shares are redeemed within one year. Expenses of the Fund are borne
pro-rata by the holders of each class of shares, except that each class bears
expenses unique to that class (including the Rule 12b-1 service and distribution
fees applicable to such class), and votes as a class only with respect to its
own Rule 12b-1 plan. Shares of each class would receive their pro-rata share of
the net assets of the Fund, if the Fund were liquidated. In addition, the
Trustees approve separate dividends on each class of shares.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles for
investment companies. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
A. SECURITY VALUATION. Equity securities are valued on the basis of valuations
furnished by a pricing service, authorized by the Board of Trustees, which
service provides the last reported sale price for securities listed on an
applicable securities exchange or on the NASDAQ national market system, or, if
no sale was reported and in the case of over-the-counter securities not so
listed, the last reported bid price except for British equities which are valued
at the mean between the last bid and last ask prices on the London Stock
Exchange. Short-term obligations with a remaining maturity of less than sixty
days are stated at amortized cost, which approximates market value. All other
securities and assets are valued at their fair value as determined in good faith
by the Fund's adviser and the relevant subadviser under the supervision of the
Fund's Trustees.
B. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME. Security transactions
are accounted for on the trade date. Dividend income is recorded on the
ex-dividend date, and interest income is recorded on the accrual basis. In
determining net gain or loss on securities sold, the cost of securities has been
determined on the identified cost basis.
C. FOREIGN CURRENCY TRANSLATION. The books and records of the Fund are
maintained in U.S. dollars. The value of securities, currencies and other assets
and liabilities denominated in currencies other than U.S. dollars are translated
into U.S. dollars based upon foreign exchange rates prevailing at the end of the
period. Purchases and sales of investment securities, income and expenses are
translated on the respective dates of such transactions.
Since the values of investment securities are presented at the foreign exchange
rates prevailing at the end of the period, it is not practical to isolate that
portion of the results of operations arising from changes in exchange rates from
fluctuations arising from changes in market prices of the investment securities.
Such fluctuations are included with the net realized and unrealized gain or loss
on investments.
Reported net realized foreign exchange gains or losses arise from: sales of
foreign currency, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the value
of assets and liabilities resulting from changes in the exchange rate.
D. FORWARD FOREIGN CURRENCY CONTRACTS. The Fund may use foreign currency
contracts to facilitate transactions in foreign securities and to manage the
Fund's currency exposure. Contracts to buy generally are used to acquire
exposure to foreign currencies, while contracts to sell are used to hedge the
Fund's investments against currency fluctuation. Also, a contract to buy or sell
can offset a previous contract. These contracts involve market risk in excess of
the unrealized gain or loss reflected in the Fund's Statement of Assets and
Liabilities. The U.S. dollar value of the currencies the Fund has committed to
buy or sell (if any) is shown in the portfolio composition under the caption
"Forward Currency Contracts Outstanding." These amounts represent the aggregate
exposure to each currency the Fund has acquired or hedged through currency
contracts outstanding at period end. Losses may arise from changes in the value
of the foreign currency or if the counterparties do not perform under the
contracts' terms.
All contracts are "marked-to-market" daily at the applicable translation rates
and any gains or losses are recorded for financial statement purposes as
unrealized until settlement date. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
E. FEDERAL INCOME TAXES. The Fund intends to meet the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to its shareholders all of its income and any net realized capital
gains, at least annually. Accordingly, no provision for federal income tax has
been made.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends and distributions are
recorded on the ex-dividend date. The timing and characterization of certain
income and capital gains distributions are determined in accordance with federal
tax regulations which may differ from generally accepted accounting principles.
These differences are primarily due to differing treatments for organization
costs and foreign currency transactions for book and tax purposes. Permanent
book and tax basis differences will result in reclassification to capital
accounts.
G. REPURCHASE AGREEMENTS. The Fund, through its custodian, receives delivery of
the underlying securities collateralizing repurchase agreements. It is the
Fund's policy that the market value of the collateral be at least equal to 100%
of the repurchase price. Each subadviser is responsible for determining that the
value of the collateral is at all times at least equal to the repurchase price.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the other party including possible delays or restrictions upon the
portfolio's ability to dispose of the underlying securities.
H. ORGANIZATION EXPENSE. Costs incurred in connection with the Fund's
organization and initial registration, amounting to approximately $64,900 in the
aggregate, were paid by the Fund and are being amortized by the Fund over 60
months.
2. PURCHASES AND SALES OF SECURITIES. For the six months ended June 30, 1999
purchase and sales of securities (excluding short-term investments) were
$126,579,044 and $156,929,577 respectively.
3A. MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES. The Fund pays gross
management fees to its investment adviser, New England Funds Management, L.P.
("NEFM") at the annual rate of 1.05% of the Fund's average daily net assets
reduced by the amount of any subadvisers fees paid by the Fund to its
subadvisers as follows: Harris Associates, L.P., Founders Asset Management, Inc.
and Janus Capital Corporation at the annual rate of 0.65% of the first $50
million of the average daily net assets of the segment of the Fund which that
subadviser manages, 0.60% of the next $50 million of such assets and 0.55% of
such assets in excess of $100 million and Montgomery Asset Management, L.P. at
the annual rate of 0.85% of the first $25 million of the average daily net
assets of the segment of the Fund that Montgomery Asset Management, L.P.
manages, 0.65% of the next $25 million of such assets and 0.55% of such assets
in excess of $50 million. Certain officers and directors of NEFM are also
officers or trustees of the Fund. NEFM and Harris Associates, L.P. are wholly
owned subsidiaries of Nvest Companies, L.P.("Nvest"), formerly known as New
England Investment Companies, L.P., which is a subsidiary of Metropolitan Life
Insurance Company. Fees earned by NEFM and the subadvisers under the management
and subadvisory agreements in effect during the six months ended June 30, 1999,
are as follows:
Fees Earned
-----------
NEFM $ 465,506
Harris Associates, L.P. 318,041
Founders Asset Management, Inc. 222,678
Janus Capital Corporation 152,880
Montgomery Asset Management, L.P. 110,569
----------
$1,269,674
==========
B. ACCOUNTING AND ADMINISTRATIVE EXPENSE. Nvest Services Company, Inc. ("NSC")
is a wholly owned subsidiary of Nvest and performs certain accounting and
administrative services for the Fund. The Fund reimburses NSC for all or part of
NSC's expenses of providing these services which include the following: (i)
expenses for personnel performing bookkeeping, accounting, and financial
reporting functions and clerical functions relating to the Fund and (ii)
expenses for services required in connection with the preparation of
registration statements and prospectuses, registration of shares in various
states, shareholder reports and notices, proxy solicitation material furnished
to shareholders of the Fund or regulatory authorities and reports and
questionnaires for SEC compliance. For the six months ended June 30, 1999, these
expenses amounted to $37,750 and are shown separately in the financial
statements as accounting and administrative.
C. TRANSFER AGENT FEES. NSC is the transfer and shareholder servicing agent for
the Fund and Boston Financial Data Services serves as the sub-transfer agent for
the Fund. For the six months ended June 30, 1999, the Fund paid NSC $375,299 as
compensation for its services in that capacity.
D. SERVICE AND DISTRIBUTION FEES. Pursuant to Rule 12b-1 under the 1940 Act, the
Trust has adopted a Service Plan relating to the Fund's Class A shares (the
"Class A Plan") and Service and Distribution Plans relating to the Fund's Class
B and Class C shares (the "Class B and Class C Plans").
Under the Class A Plan, the Fund pays New England Funds, L.P. ("New England
Funds"), the Fund's distributor (a wholly owned subsidiary of Nvest) a monthly
service fee at the annual rate of 0.25% of the average daily net assets
attributable to the Fund's Class A shares, as reimbursement for expenses
(including certain payments to securities dealers, who may be affiliated with
New England Funds) incurred by the New England Funds in providing personal
services to investors in Class A shares and/or the maintenance of shareholder
accounts. For the six months ended June 30, 1999, the Fund paid New England
Funds $130,772 in fees under the Class A Plan.
Under the Class B and Class C Plans, the Fund pays New England Funds monthly
service fees at the annual rate of 0.25% of the average daily net assets
attributable to the Fund's Class B and Class C shares, as compensation for
services provided and expenses (including certain payments to securities
dealers, who may be affiliated with New England Funds) incurred by New England
Funds in providing personal services to investors in Class B and Class C shares
and/or the maintenance of shareholder accounts. For the six months ended June
30, 1999 the Fund paid New England Funds $143,357 and $28,174 in service fees
under the Class B and Class C Plans, respectively.
Also under the Class B and Class C Plans, the Fund pays New England Funds
monthly distribution fees at the annual rate of 0.75% of the average daily net
assets attributable to the Fund's Class B and Class C shares, as compensation
for services provided and expenses (including certain payments to securities
dealers, who may be affiliated with New England Funds) incurred by New England
Funds in connection with the marketing or sale of Class B and Class C shares.
For the six months ended June 30, 1999, the Fund paid New England Funds $430,069
and $84,523 in distribution fees under the Class B and Class C plans,
respectively.
Commissions (including contingent deferred sales charges) on Fund shares paid to
New England Funds by investors in shares of the Fund during the six months ended
June 30, 1999 amounted to $378,841.
E. TRUSTEES FEES AND EXPENSES. The Fund does not pay any compensation directly
to its officers or trustees who are directors, officers or employees of NEFM,
New England Funds, Nvest, NSC or their affiliates, other than registered
investment companies. Each other Trustee receives a retainer fee at the annual
rate of $40,000 and meeting attendance fees of $3,500 for each meeting of the
Board of Trustees attended. Each committee member receives an additional
retainer fee at the annual rate of $6,000 while each committee chairman receives
a retainer fee (beyond the $6,000 fee) at the annual rate of $4,000. These fees
are allocated to the various New England Funds based on a formula that takes
into account, among other factors, the relative net assets of each fund.
A deferred compensation plan is available to the Trustees on a voluntary basis.
Each participating Trustee will receive an amount equal to the value that such
deferred compensation would have been, had it been invested in the Fund on the
normal payment date. Deferred amounts remain in the Fund until distributed in
accordance with the Plan.
4. CAPITAL SHARES. At June 30, 1999 there was an unlimited number of shares of
beneficial interest authorized, divided into three classes, Class A, Class B and
Class C capital shares. Transactions in capital shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
---------------------------- -----------------------------
CLASS A SHARES AMOUNT SHARES AMOUNT
------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ................................................ 7,129,724 $ 106,981,131 9,316,319 $ 159,412,819
---------- ------------- ---------- -------------
7,129,724 106,981,131 9,316,319 159,412,819
Shares repurchased ......................................... (8,149,583) (123,663,965) (9,870,193) (168,966,459)
---------- ------------- ---------- -------------
Net increase (decrease) .................................... (1,019,859) $ (16,682,834) (553,874) $ (9,553,640)
---------- ------------- ---------- -------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
---------------------------- -----------------------------
CLASS B SHARES AMOUNT SHARES AMOUNT
------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ................................................ 1,309,851 $ 20,459,129 370,617 $ 6,256,909
---------- ------------- ---------- -------------
1,309,851 20,459,129 370,617 6,256,909
Shares repurchased ......................................... (2,024,121) (30,707,569) (1,180,360) (19,620,126)
---------- ------------- ---------- -------------
Net increase (decrease) .................................... (714,270) $ (10,248,440) (809,743) $ (13,363,217)
---------- ------------- ---------- -------------
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
DECEMBER 31, 1998 JUNE 30, 1999
---------------------------- -----------------------------
CLASS C SHARES AMOUNT SHARES AMOUNT
------- ------ ------ ------ ------
<S> <C> <C> <C> <C>
Shares sold ................................................ 1,030,781 $ 15,901,710 590,398 $ 9,895,335
---------- ------------- ---------- -------------
1,030,781 15,901,710 590,398 9,895,335
Shares repurchased ......................................... (1,284,215) (19,774,483) (740,347) (12,369,437)
---------- ------------- ---------- -------------
Net increase (decrease) .................................... (253,434) $ (3,872,773) (149,949) $ (2,474,102)
---------- ------------- ---------- -------------
Increase (decrease) derived from capital shares transactions (1,987,563) $ (30,804,047) (1,513,566) $ (25,390,959)
========== ============= ========== =============
</TABLE>
5. LINE OF CREDIT. The Fund along with the other portfolios that comprise the
New England Funds (the "Funds") participate in a $100,000,000 committed line of
credit provided by Citibank, N.A. under a credit agreement (the "Agreement")
dated March 4, 1999. Advances under the Agreement are taken primarily for
temporary or emergency purposes. Borrowings under the Agreement bear interest at
a rate tied to one of several short-term rates that may be selected from time to
time. In addition, the Funds are charged a facility fee equal to 0.08% per annum
on the unused portion of the line of credit. The annual cost of maintaining the
line of credit and the facility fee is apportioned pro rata among the
participating Funds. There were no borrowings as of or during the six months
ended June 30, 1999.
6. SECURITY LENDING. The Fund has entered into an agreement to lend its
securities to a third party. The loans are collateralized at all times with cash
or securities with a market value at least equal to the market value of the
securities on loan. The Fund receives fees for lending its securities. At June
30, 1999 the Fund loaned securities having a market value of $4,658,794 and
collateralized by United States Treasury Bonds with a market value of
$4,791,958.
7. CONCENTRATION OF RISK. The Fund had the following geographic concentration in
excess of 10% of its total net assets at June 30, 1999: United Kingdom 11.7%.
The Fund pursues its objectives by investing in foreign securities. There are
certain risks involved in investing in foreign securities which are in addition
to the usual risks inherent in domestic investments. These risks include those
resulting from future adverse political or economic developments and the
possible imposition of currency exchange blockages or other foreign governmental
laws or restrictions.
<PAGE>
- --------------------------------------------------------------------------------
NEW ENGLAND FUNDS
- --------------------------------------------------------------------------------
LARGE-CAP EQUITY FUNDS
Capital Growth Fund
Growth Fund
Growth and Income Fund
(formerly Growth Opportunities Fund)
Balanced Fund
Value Fund
ALL-CAP EQUITY FUNDS
Star Advisers Fund
Star Worldwide Fund
International Equity Fund
Bullseye Fund
Equity Income Fund
SMALL-CAP EQUITY FUNDS
Star Small Cap Fund
GOVERNMENT INCOME FUNDS
Limited Term U.S. Government Fund
Government Securities Fund
TAX-FREE INCOME FUNDS
Municipal Income Fund
Intermediate Term Tax Free
Fund of California
Massachusetts Tax Free Income Fund
MONEY MARKET FUNDS
Cash Management Trust,
Money Market Series
Tax Exempt Money Market Trust
CORPORATE INCOME FUNDS
Short Term Corporate Income Fund
(formerly Adjustable Rate U.S. Government Fund)
Bond Income Fund
High Income Fund
Strategic Income Fund
To learn more, and for a free prospectus, contact your financial representative.
Visit our World Wide Web site at www.mutualfunds.com
New England Funds, L.P., Distributor
399 Boylston Street
Boston, MA 02116
Toll Free 800-225-5478
This material is authorized for distribution to prospective
investors when it is preceded or accompanied by the Fund's
current prospectus, which contains
information about distribution charges, management and other
items of interest. Investors are advised to read the
prospectus carefully before investing.
New England Funds, L.P., and other firms selling shares of New England
Funds are members of the National Association of Securities Dealers,
Inc. (NASD). As a service to investors, the NASD has asked that we
inform you of the availability of a brochure on its Public Disclosure
Program. The program provides access to information about securities
firms and their representatives. Investors may obtain a copy by
contacting the NASD at 800-289-9999 or by visiting their Web site at
www.NASDR.com.
Y2K Readiness Report: New England Funds has kept pace with the Y2K
challenge. Mission critical systems have been tested and non-mission
critical systems are scheduled for completion by September 30, 1999.
Y2K is a top priority at New England Funds. For more information on
our Y2K readiness, please visit our Web site at www.mutualfunds.com.
This material represents Year 2000 Readiness Disclosure pursuant to the
Year 2000 Information and Readiness Disclosure Act.
<PAGE>
------------------
[LOGO](R) BULK RATE
NEW ENGLAND FUNDS(R) U.S. POSTAGE
Where The Best Minds Meet(R) PAID
BROCKTON, MA
PERMIT NO. 770
------------------
---------------------
399 Boylston Street
Boston, Massachusetts
02116
---------------------
SW58-0699
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